Gold spots (XAUUSD) have experienced a modest decline this week, hovering around $2,035 per ounce. The non-yielding bullion found solace earlier this week as the yellow metal inched closer to the coveted $2,040 mark, buoyed by a pullback in the US dollar and Treasury yields. However, the rally remains fragile, overshadowed by hawkish Fed rhetoric and stronger-than-expected economic data suggesting a delayed rate cut timeline. This has dampened market expectations for an imminent rate cut, with traders now pricing in a 68% chance for one in May, down from 80% earlier.
Despite the soft landing optimism expressed by some Fed officials, gold faces headwinds from rising yields and a strengthening dollar, traditionally seen as antithetical to its appeal. Further muddying the waters are positive risk-on sentiments stemming from China’s stimulus measures, potentially diverting investor attention away from safe-haven assets like gold.
Technical
The 4-hour chart paints a technical picture of indecision. The price action trades along the 20-SMA (green line), below the 50-SMA (blue line), and just above the 100-SMA (orange line), indicating short-term neutrality. The downward-sloping 20-SMA suggests potential downside pressure, while the flat RSI indicates a balanced market.
Continued downward pressure could find support at the 23.60% Fibonacci retracement level ($2,022.24/ounce). A break below the initial support could offer short-term trading opportunities towards the $2,011.28/ounce and $2,001.79/ounce support levels into play in the short term.
However, short-term trading opportunities could exist towards the 50.00% Fibonacci retracement level ($2,045.11/ounce) should the price action sustain a push above the 38.20% Fibonacci retracement level. A break above the $2,045.11/ounce level would likely bring the 61.80% Fibonacci retracement level ($2,055.33/ounce) within the bulls’ reach in the short term.
Summary
Gold broke below $2,050 resistance and currently trades below its key moving averages, suggesting short-term weakness. However, continued demand from central banks and a potential soft landing for the US economy could provide underlying support.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
